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Will Slowing Business Investment Hold Back U.S. Equities?

This article was originally published on ETFTrends.com.

U.S. Gross domestic product (GDP) grew at a 2.1% annual pace in the third quarter, which came out higher than the anticipated 1.9%, but business investment languished with nonresidential fixed investment falling by 2.7%. Will those hold back U.S. equities?

According to market experts, tariffs from the U.S.-China trade wars were to blame for the decline. Businesses were hesitant to invest any capital with lingering fears of tariffs hampering growth.

"Slowing investment is mainly due to heightened uncertainty over the future direction of US trade policy, as well as slowing external demand amid a cooling of the global economy," said Agathe Demarais, the global forecasting director at the Economist Intelligence Unit. "Against this backdrop, consumer demand represents the only remaining engine of US growth."

Both the U.S. and China have yet to reach a tangible “phase one” deal, but the markets have been driving off optimism that a deal will eventually be reached sooner rather than later. This caused major indexes like the S&P 500 and Nasdaq Composite to reach record highs in this shortened trading week as a result of the Thanksgiving holiday.

Can U.S. equities continue to be outperformers with respect to international equities?

Right now, investors are feeling the good vibrations in U.S. equities, which could open up opportunities in relative weight ETFs. In particular, this creates an opportunity for the Direxion FTSE Russell US Over International ETF (RWUI) .

RWUI features:

  • Seeks investment results, before fees and expenses, that track the Russell 1000®/FTSE All-World ex-US 150/50 Net Spread Index (the “index”).
  • The fund, under normal circumstances, invests at least 80% of its net assets (plus borrowing for investment purposes) in securities that comprise the Long Component of the index or shares of ETFs on the Long Component of the index.
  • The index measures the performance of a portfolio that has 150% long exposure to the Russell 1000® Index (the “Long Component”) and 50% short exposure to the FTSE All-World ex-US Index (the “Short Component”).

Investors looking to play the other side can use the Direxion FTSE International Over US ETF (RWIU) to capitalize on international equities will outdoing U.S. equities. RWIU seeks investment results, before fees and expenses, that track the FTSE All-World ex US/Russell 1000 150/50 Net Spread Index, which measures the performance of a portfolio that has 150 percent long exposure to the FTSE All-World ex US Index and 50 percent short exposure to the Russell 1000® Index.

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